A trust is a legal arrangement where an individual or an organization holds and manages property for the benefit of others. In India, trusts are administered by the Indian Trusts Act 1882 and are subject to various compliance requirements that must be met to ensure the smooth functioning of the trust. If you are planning to complete your trust company registration in India, it is vital that you must have a basic understanding of trust and Types of trusts. Let’s begin with the meaning of trust and then the types of trust.
What is a Trust?
In India, trusts are recognized as legal entities and are governed by the Indian Trusts Act of 1882. A trust is essentially an arrangement where a person known as the "settlor" transfers property to another person, also called the "trustee", to hold and manage it for the benefit of a third person, known as the "beneficiary”. Completing your NGO registration in India allows you to proceed with Trust company registration.
Types of Trust in India
There are several different types of trust in India, each with its own specific purpose and requirements. Here are a few of the most common types of trusts in India:
Religious Trusts
Religious trusts are created for religious purposes and are usually managed by a group of people known as the "managers." The property held by a religious trust is used to maintain religious buildings, institutions, or other assets.
Public Charitable Trusts
Public charitable trusts are created for the purpose of providing public benefits, such as education, healthcare, or social welfare. The property held by a public charitable trust is used to support charitable activities.
Private Charitable Trusts
Private charitable trusts are similar to public charitable trusts but are created for the benefit of a specific family or group of people. The property held by a private charitable trust is used to support charitable activities for the benefit of the specific family or group of people.
Family Trusts
Family trusts are created for the benefit of a specific family. The property held by this types of trust is used to support the family, such as providing financial assistance, education, or healthcare.
Educational Trusts
Educational trusts are created for the purpose of promoting education. The property held by an educational trust is used to support educational institutions, such as schools, colleges, or universities.
Wakf Trusts
Wakf trusts are a unique type of trust in India that is governed by the Wakf Act of 1954. A wakf trust is created for the purpose of providing religious and charitable benefits. The property held by a Wakf trust is used to support religious and charitable activities and is considered inalienable, meaning that it cannot be sold or transferred to another person.
Special Trusts
Special trusts are created for specific purposes, such as the protection of wildlife, environmental conservation, or the promotion of arts and culture. The property held by a special trust is used to support the specific purpose for which it was created.
Compliance Requirements of Trusts in India
Now that you understand the basics let's go over some of the compliance requirements you must meet after successfully completing NGO registration in India:
Trust Company Registration
The first step in establishing trust in India is to complete NGO registration in India. The Indian Trusts Act 1882 requires that all trusts be registered with the Registrar of Trusts in the state where the trust is located. The registration procedure involves the submission of an application, along with supporting documents, such as the trust deed and the names and addresses of the trustees.
Filing of Annual Returns
Trusts in India are required to file annual returns with the Registrar of Trusts. The returns must include details of the trust's activities, including its income and expenses, as well as any changes to the trust's structure, such as the appointment of new trustees.
Maintenance of Books of Accounts
Trusts are required to maintain accurate and complete books of accounts, including records of income, expenses, and assets. These records must be audited annually by a qualified chartered accountant.
Payment of Taxes
Trusts in India are subject to various taxes, including income tax and wealth tax. They are also required to file tax returns and pay taxes on time. In addition, trusts may be subject to gift tax if they receive gifts or donations from individuals or organizations.
Filing of Tax Returns
Trusts must file tax returns with the Income Tax Department annually. The returns must include details of the trust's income and expenses, as well as any gifts or donations received during the year.
Compliance with the Indian Trusts Act, 1882
Trusts must comply with all provisions of the Indian Trusts Act, 1882, including those related to the appointment of trustees, the management of the trust's property, and the distribution of its income.
Compliance with Other Laws
Trusts must also comply with other relevant laws, such as the FCRA(Foreign Contribution Regulation Act) and the Prevention of Money Laundering Act (PMLA), if applicable.
If you’re looking to establish your trust in India, the above information should be helpful when you begin NGO registration in India. Moreover, the compliance rules mentioned here would help you get your trust up and running faster, therefore preventing any downtime. In case the process of completing your trust company registration seems extremely time-consuming, let an expert like Lawgical India handle it. Our teams of legal and registration professionals will have your trust registered and ready while you take care of other important business.
